Navigating Health Care Reform

By Laura Kushner

The complexities of federal health care reform, also known as the Patient Protection and Affordable Care Act (PPACA), have more than a few of us thinking about early retirement. Ironically, however, most of us can’t afford the health insurance. So, let’s get started and figure this out!

The first thing you need to do is calculate whether your city is considered a small or large employer under PPACA. You will have to follow some precise guidelines, and count your full-time employees (30+ hours per week) as well as the hours worked by seasonal employees, paid on-call firefighters, and probably even elected officials. Large employers are those with 50 or more full-time equivalent employees, but calculating that is complicated. For step-by-step help with this process, the League has a document you can download at www.lmc.org/sharedhc. Until you do this, you’re just guessing about the impact that PPACA will have on your city.

Small employers Once you’re certain that your city is a small employer, you can stop worrying about the “pay or play” penalties. You will also be able to purchase health care coverage for your employees through the new state exchange, called MNsure, starting in 2014. Learn more about MNsure at www.mn.gov/hix.

But don’t gloat, small employers. You won’t get out of everything. You will have to provide your employees with certain notices, and it’s also likely that either your city or your insurance provider will be subject to certain fees and taxes, which will most likely be passed on as higher premiums.

Large employers If you’re a large employer under PPACA, sorry, but you need to kick it into high gear. You need to make some decisions now to avoid those “pay or play” penalties.

For example, if you don’t offer health insurance coverage to substantially all of your eligible employees (generally those working 30+ hours per week), then you might be subject to a penalty starting in 2014 if at least one of your full-time employees purchases coverage through MNsure and receives a subsidy. The annual penalty you would have to pay would be $2,000 per full-time employee (excluding the first 30 employees).

If you do offer health insurance coverage to at least 95 percent of your full-time employees, and it meets the minimum essential coverage defined by the new law, then you still might be subject to a penalty if it is deemed “unaffordable” and one of your full-time employees receives a premium subsidy through MNsure. The amount of the penalty for a given month equals the number of full-time employees who receive a premium subsidy for that month multiplied by 250.

Tax on high-cost plans And starting in 2018, the “Cadillac plan” tax will be in play for all employers—large and small. A Cadillac plan is determined based on the cost of the health insurance coverage provided to your city’s employees. The cost of a plan with single coverage that exceeds $10,200 annually, or family coverage that exceeds $27,500 annually, will be considered a Cadillac plan beginning in 2018.

Coverage costing more than those amounts will be subject to a 40 percent excise tax on the value of coverage that exceeds the Cadillac plan thresholds. If you are fully insured, the insurer is required to pay the tax, but it is very likely that the cost of this tax will be passed on to the city and employee as an increased premium.